U.S. Gambling Regulators Move to Shut Down Kalshi and Other Prediction Markets

^{Pictured: John Martin, Director at Maryland Lottery and Gaming}

Fast-growing prediction market platforms (like Kalshi, Robinhood, and Crypto.com) are facing mounting legal pressure, with gambling regulators in five states ordering them to cease operations, iGaming Business reports.

Regulators in Illinois, Ohio, Nevada, New Jersey, and Maryland have issued formal notices stating that these platforms are operating illegally, as they lack the necessary gambling licenses to take bets in those states.

Beyond those five states, Massachusetts and Michigan have launched investigations into the companies offering prediction markets, while Montana has specifically ordered Kalshi to stop operating.

Maryland Lottery and Gaming Director John Martin highlighted concerns over consumer protections and tax compliance, noting that platforms like Kalshi, Robinhood, and Crypto.com do not enforce the same age restrictions as licensed bookmakers.

Additionally, since these platforms do not hold gambling licenses, they avoid paying state gambling taxes, a growing point of contention for regulators.

Kalshi, Robinhood, and Crypto.com, however, argue that they operate as decentralized prediction markets rather than gambling businesses. Under this classification, they are regulated by the U.S. Commodity Futures Trading Commission (CFTC) rather than state gaming authorities, allowing them to bypass gambling laws.

Despite their legal stance, the resemblance to sportsbooks has sparked backlash from licensed betting operators and lawmakers, who see the national rise of sports prediction markets as a direct challenge to state-regulated bookmakers.

The regulatory battle has escalated into a legal dispute in Nevada, where Kalshi recently won a key court ruling. According to Next.io, a judge has granted Kalshi permission to continue offering sports event markets at least until the case is resolved.